Badridas Keshawprasad Vs. Deputy Cit - Court Judgment

LegalCrystal Citation

legalcrystal.com/71610

Court

Income Tax Appellate Tribunal ITAT West Bengal

Decided On

Jun-20-2001

Appellant

Badridas Keshawprasad

Respondent

Deputy Cit

Excerpt: this appeal is directed against the order of penalty dated 14-4-1989 passed by the commissioner (appeals) for the assessment year 1975-76.the facts in brief are that during the appellate proceedings against the assessment made by the assessing officer the learned commissioner (appeals) found that the assessees claim for interest of rs. 3,04,000 as business expenditure was unsustainable. as the assessing officer had already disallowed rs. 45,000 the learned commissioner (appeals) enhanced the assessment by rs. 2,59,000 disallowing the entire expenditure. the learned commissioner (appeals) further viewed that the assessees claim for rs. 2,59,000 towards interest before him was riot a bona fide claim and hence penalty under section 271(1)(c) of the income tax act, 1961 was exigible. he,.....

Judgment: This appeal is directed against the order of penalty dated 14-4-1989 passed by the Commissioner (Appeals) for the assessment year 1975-76.

The facts in brief are that during the appellate proceedings against the assessment made by the assessing officer the learned Commissioner (Appeals) found that the assessees claim for interest of Rs. 3,04,000 as business expenditure was unsustainable. As the assessing officer had already disallowed Rs. 45,000 the learned Commissioner (Appeals) enhanced the assessment by Rs. 2,59,000 disallowing the entire expenditure. The learned Commissioner (Appeals) further viewed that the assessees claim for Rs. 2,59,000 towards interest before him was riot a bona fide claim and hence penalty under section 271(1)(c) of the Income Tax Act, 1961 was exigible. He, therefore, imposed penalty accordingly.

Before us, the learned counsel for the assessee submitted that the assessees claim was bona fide and hence penalty could not be levied.

The learned Departmental Representative on the other hand strongly supported the order of the ld. Commissioner (Appeals).

We have considered the rival submissions, facts and the material on record. It is not disputed that no materials have been brought on record to show that the assessee had received interest higher than that declared in the return. There is also not a case that the assessee claimed interest as expenditure higher than that paid by it to the creditors. The crux of the issue is whether the claim of the assessee for business expenditure of Rs. 2,59,000 can be considered as bona fide. The learned Commissioner (Appeals) in his order mentioned that the Honble Allahabad High Court in the case reported in 68 ITR 76 had observed in the context of interpreting the expression bona fide as under : "In order that a transaction is bona fide it must be shown that was done in the open and straight forward manner without subterfuge or concealment of any kind or any attempt to make the transaction appear other than that what it was in reality." We fail to locate such decision as mentioned by the learned Commissioner (Appeals). We are, therefore, unable to consider in what context this observation had been made by the Honble Allahabad High Court. On the contrary, we find that the Honble Delhi High Court in the case of Add). CIT v. Delhi Cloth & General Mills Co. (157 ITR. 822 pages 828 & 829) held as under : "The mere fact that the plea of the assessee that the expenditure in question was of revenue nature was not accepted upto the Tribunal, by itself did not mean that the assessee had furnished inaccurate particulars of its income by not adding that back to its total income." In the case before the Honble High Court of Delhi, it was decided whether the fact that certain expenditure which was to be treated as capital expenditure was claimed by the assessee as revenue expenditure, could be a reason for levying penalty. As already stated, the Honble Delhi High Court negatived such reason for imposition of penalty.

Therefore, non-acceptance of an expenditure as a revenue expenditure is not conclusive for the purpose of penalty. We, therefore, are of the opinion that the penalty was not rightly levied we may say before conclusion that we have perused the decision of the Tribunal in the quantum appeal confirming the view of the department that the expenditure towards internet could not be allowed as revenue expenditure. But, as we have already stated, it will not be enough for imposition of penalty under section 271 (1)(c) of the Act.

This appeal, is by the assessee against the Commissioner (Appeals)s order under section 271(1)(c) imposing the penalty of Rs. 2,59,000 for the assessment year 1975-76.

The brief facts leading to the present appeal are that during the appellate proceedings before the Commissioner (Appeals) against the assessment made by the assessing officer, the Commissioner (Appeals) found that the assessees claim for interest of Rs. 3,04,000 as business expenditure was not allowable as deduction. As the assessing officer had already disallowed Rs. 45,000, the learned Commissioner (Appeals) enhanced the assessment by Rs. 2,59,000 (Rs. 3,04,000-Rs. 45,000), thereby disallowing the entire expenditure. The assessee is a partnership concern consisting of four partners, namely, M/s. Shri K.P.Goenka, R.P. Goenka, J.P. Goenka and G.P. Goenka. The firm was carrying on money-lending business and also was deriving income by way of dividend from shares and interest on securities. For the assessment year 1975-76 the firm filed return declaring loss of Rs. 2,42,884. The assessment was completed by the assessing officer on a total loss of Rs. 1,97,885. During the course of hearing of the appeal the Commissioner (Appeals) found that the assessee had claimed interest deduction which has not been utilised for the business purpose and hence he sought to enhance the same and according)y issued show-cause notice for the enhancement and in fact, enhanced the income after issuing show-cause notice to the assessee and after affording reasonable opportunity of being heard. The assessee filed appeal to the ITAT against the quantum addition on account of enhancement and the same has been confirmed by the ITAT in ITA No. 1397(Cal.) of 87 dated 28-7-1989 for the assessment year 1975-76. The Commissioner (Appeals) has also initiated penalty proceedings under section 271(1)(c) and after issuing show-cause notice imposed the penalty on 14-4-1989. The assessee has come in appeal to Tribunal against the said imposition of penalty by the Commissioner (Appeals).

During the course of hearing of the appeal the learned AR. of the assessee submitted that the imposition of penalty is not justified in the instant case. Mere confirmation of quantum by the ITAT itself is not enough or leads to the conclusion that the penalty proceedings are automatically attracted. It is further submitted that the enhancement was made by disallowance of bona fide expenditure with reference to which all the facts have been placed before the Commissioner (Appeals) and they are all contemporaneous evidence available at the time the return as well as when the Income Tax Officer made the assessment. The disallowance was made on the ground that the assessee firm did not advance the amounts to certain relatives of the partners in the ordinary course of business and they were advanced to facilitate the acquisition or controlling interest by the family members of the Goenka. The customers of the financier invested the moneys in certain manner could not normally constitute a ground for disallowing the interest expenditure incur-red by the financier of its borrowings.

Controlling interest might be an additional advantage for the members of the family but on that ground investment in shares of B.N. Eliens Co. could not be regarded as not an investment in the normal course of business. In any case it is submitted that there is no suppression of any material fact regarding the nature of the expenditure. The disallowance of interest on the impugned amount would not partake the character of concealment of income or give rise to any inference that the assessee did not furnish inaccurate particulars with reference to the same. In this back-ground it was urged that the penalty proceedings commenced with reference to the disallowance of Rs. 2,59,000 should be dropped.

The learned Departmental Representative on the other hand, completely relied on the findings of the Commissioner (Appeals) in its appellate order enhancing the income and order passed by him under section 271(1)(c) for the year under appeal.

I have considered the submissions of the parties with reference to the papers filed and I am not in agreement with the order passed by the learned Brother in this regard. I differ with him because the Commissioner (Appeals) on investigation found that the assessee borrowed from its own associate concerns moneys at a higher rate of interest and advanced the same to the various members of the Goenka family at a lower rate of interest. This apart from being not a financing transaction in the ordinary course of business, was meant to inflate the interest expenditure with a view to reducing the incidence of tax on true income of the firm. The members of the family were made to invest in the shares of M/s. B.N. Eliens & Co., so that the Goenka family could take over the sick company. The investment was made not with a view to earn any dividend income for purpose of acquising that business. There was no possibility of getting any dividend income from those investments. The Commissioner (Appeals) has also found that the funds of G.P. Goenka and others, HUF had also been passed on to their own members through the medium of the assessee-firm for investment in the same shares. The Commissioner (Appeals) has brought these things clearly in its quantum appeal order in paras 5 and 6 of the order. All these facts and circumstances clearly go to show that the entire thing is an integrated scheme further from the assessees business of money lending, and has been brought into existence with a view to under-state its true income by inflating claim of interest payment as well as for facilitating other members of the Goenka group to claim deduction of interest payment of the assessee firm with a consequent reduction in the incidence of tax in their respective assessment. It is also fact which is worth noting that the interest has been paid to associate concern and close relatives of the partners of the firm at a much higher rate of interest than the rate of interest received from the Goenka group to whom the moneys had been advanced. L-1 the penalty proceedings also no material warranting a different view oil this issue could be referred to or relied by the assessees counsel. The Commissioner (Appeals) has Correctly brought out the fact that the assessee did not furnish correct particulars with regard to its claim on account of interest. Therefore, I hold that the imposition of penalty is justified.

In this connection I may further mention that in the cases of this type the entire conduct of the assessee has to be judged and taken into consideration right from the beginning to the end and the entire facts and circumstances and related evidence, material to be taken into account and not any isolated issue or action. So far as the expenses, deductions or exemptions are concerned, they can and could escape the penal consequence of the law so long as the assessee furnishes some particulars of his income, or expenses in narrow terms of innocence, difference of opinion or wrong belief or ignorance. This, in my view could not be the intention of the Legislature in enacting the penal provisions like section 271(1)(c). I find that the Explanation to section 271(1)(c) is clearly applicable as the law then stood as the assessee deliberately and consciously furnished inaccurate particulars of its income. In this connection the findings of Lahore High Court in the case of Nagin Chand Shiv Sahai v. CIT (1938) 6 ITR 534 is worth noting. In the above-mentioned case Their Lordships in the last para have observed that "falsehood in accounts can take only two forms : either an item may be suppressed dishonestly or an item may be claimed fraudulently, and in penalising concealment of the particulars of ones income as well as deliberate furnishing of inaccurate particulars, section 28 penalises both forms of falsehood in the case before us it has been found as a fact that the assessee deliberately claimed a false deduction and in the light of remarks made above, we are disposed to hold that the case of the assessee fell within the ambit of section 28".

In this connection I may mention that the assessee filed the return showing loss of Rs. 2,42,884 which was assessed by the Income Tax Officer under section 143(3) at a loss of Rs. 1,97,855 and after enhancement of Rs. 2,59,000 by the Commissioner (Appeals) this has resulted in a positive figure of Rs. 61,115. This clearly goes to show that the assessee has furnished inaccurate particulars attracting the penalty under section 271(1)(c) of the Income Tax Act. In this connection reliance is placed on the Allahabad High Court decision in the case of Mirzapur Construction Co. Ltd. v. CIT (1980) 122 ITR 8281 wherein it has been held that the explanation added to section 271(1)(c) raises a presumption of concealment and filing of inaccurate particulars of income in cases where the returned income falls short of 80 per cent of the assessed income. The department is not saddled with the onus of proving that the assessee was guilty of concealment or filing inaccurate particulars.

Lastly, I would like to mention the findings of the Supreme Court in the case of Chuharmal v. CIT (1988) 172 ITR 2502 which also supports the abovementioned view of the Allahabad High Court. Their lordships in the said case have held that if the returned income is less than 8090 of the assessed income, then Explanation to section 271(1)(c) is attracted and the penalty under section 271(1)(c) is attracted and is leviable. In this connection the Explanation to section 271(1)(c) of the Income Tax Act inserted by the Finance Act, 1964 which reads as follows : "ExplanationWhere the total income returned by any person is less than eighty per cent of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." In this connection the following Supreme Court decision in the case of Mc Dowell and Co. Ltd. v. CTO. (1985) 154 ITR 148/22 Taxman 11 is worth noting : In our view the proper way to construe a taxing statute, which considering device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that tile judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai, J. In Wood-Polymer Ltd. In re. & Bengal Hotels Ltd., In re. (1977) 47 Comp.

Cas. 597 (Guj.) where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.

It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to existing legislation with the aid of "emerging" techniques and interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction." From the foregoing discussion it is amply clear that the penalty provisions are clearly attracted in the instant case and imposition of the penalty is justified and the same is accordingly confirmed.

We, having differed on the following point in the above appeal filed by the assessee, refer the following point of difference to the President under section 255(4) of the Income Tax Act, 1961 : "Whether in the circumstances of the present case, levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 was justified ?" On account of difference of opinion between the Judicial Member and the Accountant Member, the matter was referred by the President, Income Tax Appellate Tribunal for my opinion as Third Member on the following point of difference : "Whether in the circumstances of the present case, levy of penalty under section 271(1)(c) of the Income Tax Act. 1961 was justified." A sum of Rs. 7,91,962 was paid by the assessee as interest to various parties including bank and was claimed as a deduction. On the contrary, the assessee realised a sum of Rs. 2,38,828 from the sundry parties as interest which was offered to tax. The assessee made an investment of Rs. 3,78,000 in purchasing 1,000 shares of B.N. Eliens & Co. Ltd. (BNE) which was claimed to be a part of stock-in-trade. The assessing officer, however, held that the investment in shares of BNE was not for then purpose of business in shares as well as not for investment in shares but for gaining control over the company by the Goenka group.

The interest paid for the purchase of shares cannot be allowed as against business income of the assessee, nor could it be deducted against dividend income because there was no income derived by the assessee from BNE. Applying the rate of 16 per cent on the investment of Rs, 3,78,000, the assessing officer made a disallowance of Rs. 45,000 being the interest for the period from 20-12-1973 to 11-9-1974.

The assessee carried the matter in appeal and the Commissioner (Appeals) while considering the claim of the assessee against the disallowance of Rs. 45,000 opined that the entire deposit of Rs. 19 lakhs received from the associate concerns was utilised for the purpose of investment in the shares of BNE-to the extent of Rs. 3,78,000 by the assessee and the balance by associate concerns and others connected with Goenka group. He, therefore, issued a notice under section 251(2) of the Act to the assessee to show cause why the disallowance be not enhanced to Rs. 3,04,000 being the interest @ 16 per cent on the entire amount of Rs. 19 lakhs as against Rs. 45,000 proposed by the assessing officer. The assessee agitated the proposal for enhancement by referring to the decision of the Supreme Court in the case of CIT v.Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 claiming that the Commissioner (Appeals) had no power to introduce a new source of income. It was also contended that the assessee was carrying on money-lending business and, therefore, it had borrowed money as well as lent money in the ordinary course of money-lending business and that the purpose for which the parties utilised the amount was not relevant for the purpose of determining whether the interest claimed by the assessee is deductible or not. It was also submitted that the rate of interest charged for all the borrowers was the same except in the case of R.P. Goenka where a small sum of Rs. 60,500 was advanced at 5 per cent, interest and it was, therefore, submitted that there was no case for enhancement of the disallowance of interest. It was also submitted that interest received from Goenka family was @ 12 per cent, whereas interest paid was ranging from 12 per cent to 13.5 per cent and, accordingly, the difference between the interest received and interest paid amounting to Rs. 7,690 at best could be disallowed under section 40A(2) of the Act. The Commissioner (Appeals) did not agree with the contention of the assessee and enhanced the assessment by Rs. 2,59,000 (Rs. 3,04,000-Rs. 45,000).

The assessee carried the matter in further appeal to the Tribunal an(-) the Tribunal upheld the enhancement and, accordingly, the disallowance of Rs. 3,04,000 for payment of interest. The order of the Tribunal is in ITA No. 1397 (Cal.)/1987, dated 28-7-1989 and the relevant portion is in paragraphs 9 to 11 which for the sake of brevity are reproduced hereunder : "9. We have considered the rival submissions, papers filed and case law cited before us. For allowance of a claim for deduction of interest under section 36(1)(iii), the following conditions are to be fulfilled : (i) The money, that is, capital, must have been borrowed by the assessee; If the object of the borrowing was illusory or colourable not genuinely for business purposes this provision will have no application (Govan Brothers v. CIT 48 ITR 930, 941). In order to deduct interest paid by the assessee on loans taken by him it is for him to prove that each if the loans on which he paid interest in the accounting year was utilised for the purposes of his business (Mir Mohd. Ali v. CIT 38 ITR 413). As pet. the decision of the Madras High Court in the case of Milapchand R.Shah & Others v. CIT(58 ITR 525, 530) it has to be established that the money was in fact borrowed for the purpose of the business and that it could be shown only by the use of the money, whether in the particular accounting year or during in an earlier period. The position would be signally different if the money borrowed never appeared to have been utilised at all for the purpose of the business but, on the other hand, had been utilised for a totally different purpose. In the present case the amounts of Rs. 14,00,000 and Rs. 5,00,000 were borrowed from Gouri Prosad Goenka and others (HUF) and Moorarjee Gokuldas Spinning and Weaving Co. Ltd. respectively on 20-12-1973. On the same date the following loans were made to interested persons of the assessee : Further on 21-12-73 the following loans were made to interested persons of the assessee : On the same date i.e. on 21-12-1973 the assessee purchased 1000 shares in BNE. The assessee paid interest to its creditors as under : The assessee collected interest at the rate of 12 per cent only from the interested persons to whom the moneys were advanced as detailed in page 27 of the paper book filed. The interested persons to whom the moneys were lent by the assessee utilised the funds for purchasing the shares in BNE. The purchase of the shares in BNE was as under : The assessee also purchased 1000 shares in BNE by utilising the borrowed funds as stated earlier. B.N. Elien & Co. Ltd. is a losing concern. It has not declared any dividend since long past. During the year under review and the subsequent years also there was no dividend declared by that company because of heavy losses suffered. The purchase of shares by the assessee company in BNE in such circumstances cannot be taken as transaction entered into by a prudent businessman. (See the case of CIT v. Coimbatore Sale in Transport Private Ltd. 61 ITR 480).

By borrowing the money and by lending the money to the interested persons to acquire the shares of BNE, the assessee acted as a conduit pipe. The purpose of the assessee and the interested persons who were the borrowers of the assessee is to acquire the siezable chunk of shares in BNE and to utilise that shareholding power for getting the assessee firms partner Sri R.S. Goenka as Chairman of the Board of Directors of National Tobacco Ltd. Borrowals by the assessee company of Rs. 19 lakhs is not for genuine business purposes. The borrowing is illusory and colourable. Hence the assessees claim for deduction of interest paid is not allowable under section 36(1)(iii) of the Income Tax Act, 1961.

The assessees counsel raised an alternate contention that since the borrowals were at the interest rate of 12 per cent and the lending was given at the interest rate of 12 per cent disallowance should be restricted to per cent only. But his argument is contrary to the facts.

The assessee paid interest to Gouri Prosad Goenka and others (HUF) at the rates of interest between 12 per cent to 18 per cent and to Moorarjee Gokuldas Spinning and Weaving Co. Ltd. at 13 per cent. So this argument is to be rejected.

10. The assessees counsel made another alternative plea that the amount of interest of Rs. 45,000 disallowed by the Income Tax Officer towards interest for the acquisition of shares by the assessee in BNE should be allowed under section 57(iii) of the Income Tax Act, 1961. As already held by the Tribunal in its decision dated 21-1-1980 in the case of Uma Goenka (supra) it cannot be said that the assessee acquired the shares of BNE for the purpose of earning income. The interest payment on the amount of Rs. 3,78,000 (utilised for the acquisition of shares in BNE) cannot be said to have been incurred wholly and exclusively for the purpose of earning income. As per the decision of the Supreme Court in the case of Seth H. Dalmia v. CIT 110 ITR 644 before section 57(iii), read with section 58 can be attracted one of the conditions to be fulfilled is that the expenditure must have been incurred wholly and exclusively for the purpose of earning income or making profit. The purpose behind the borrowal is not the earning of dividend but to get R.P. Goenka as Chairman. So the condition as laid down by Supreme Court is not fulfilled in the assessees case before us in respect of the assessees claim for deduction of Rs. 45,000 under section 57(iii).

Regarding the enhancement made by the Commissioner (Appeals) in the disallowance of interest payment by Rs. 2,59,000 the assessee contended that the Commissioner (Appeals) exceeded his jurisdiction tinder section 251(2) by finding out new source of income. According to him, the Commissioner (Appeals) found out a new source for making the addition and this is bit by the decision in 66 ITR 443 (supra). In fact, the Commissioner (Appeals) has not found out any new source of income in the assessees case. So the assessees argument has to be rejected.

11. On the facts and circumstances of the case we uphold the order of the Commissioner (Appeals)." Since the Commissioner (Appeals) enhanced the assessment, he initiated the proceedings under section 271(1)(c) and levied a penalty of Rs. 2,59,000 on the assessee for concealment by relying upon his finding in the appellate order in the quantum appeal. According to him, the disallowance in the instant case was on account of a further investigation of the relevant material which was not placed by the assessee before the assessing officer and the aforesaid material disclosed the assessees motive to understate the income by inflating the claim under the head "interest". He, accordingly held that the assessees claim was not bona fide and to that extent the assessee did not furnish correct particulars and consequently the penalty under section 271(1)(c) was leviable. He, therefore, directed the assessing officer to quantify the minimum penalty leviable with reference to the amount of Rs. 2,59,000 as per law as it stood on 4-4-1987, the date of initiation of penalty proceeding.

The assessee carried the matter in appeal and there struck a difference of opinion between the two Members-The Judicial Member holding that it was a non-acceptance of the expenditure as a revenue expenditure and that was not enough for imposing the penalty under section 271(1)(c) in view of the Delhi High Court decision in the case of Additional CIT v.Delhi Cloth & General Mills Co. Ltd. (1986) 157 ITR 822; the Accountant Member holding that this apart from being not a financing transaction in the ordinary course of business, was meant to inflate the interest expenditure with a view to reducing the incidence of tax on true income; that other members of the family were made to invest in the shares of BNE so that the Goenka family could over the sick company not with a view to earn any dividend income, there being no possibility of getting any dividend. He also felt worth mentioning that the interest has been paid to associate concerns and close relatives of the partners at a much higher rate of interest than the rate of interest received from Goenka group to whom the money had been advanced and that in the penalty proceeding also no material warranting a different view could be referred to or relied upon by the assessee. In the last, he referred to the decision of the Supreme Court in the case of Chuharmal (supra), wherein it was held that if the returned income was less than 80 per cent of the assessed income, then Explanation to section 271(1)(c) is attracted and penalty under section 271(1)(c) is leviable. He then referred to the provisions of explanation as inserted by, the Finance Act, 1964 and thereafter the decision of the Supreme Court in the case of McDowell & Co. Ltd. (supra).

In the background of these facts, the question extracted in paragraph-1 above was referred to me for my opinion as Third Member.

The assessee borrowed a sum of Rs. 14 lakhs from Gouri Prosad Goenka and others (HUF) and Rs. 5 lakhs from Moorarjee Gokuldas Spinning & Weaving Co. Ltd. on 20-12-1973. The interest rate was varying from 12.5 per cent to 18.5 per cent in the case of Gouri Prosad Goenka (HUF) and 13.5 per cent in the case of Moorarjee Gokuldas Spinning & Weaving Co.

Ltd. The assessee advanced the following loans on 20-12-1973 itself.

The assessee advanced further loans on the next day, i.e. 21-12-1973 of Rs. 2,94,000 to each Rama Prasad Goenka & Others (HUF) and Uma Goenka.

It had also purchased 1000 shares of BNE on that date for a sum of Rs. 3,78,000. The parties to whom the loans were given by the assessee also purchased shares of BNE, except in the case of Munia Chamaria to whom a small sum of Rs. 18,000 was advanced. The allegation of the Commissioner (Appeals) in making the disallowance and levying the penalty is that the entire loan amount of Rs. 19 lakhs has been utilised for the purchase of shares of BNE by the assessee and its associates and that it was with a view to acquire controlling interest of Goenka group and consequently by claiming the same the assessee has furnished inaccurate particulars of its income. So far as the investment in shares of BNE is concerned, the disallowance was made by the assessing officer and no penalty proceedings were initiated by him.

Therefore, the penalty for the disallowance of Rs. 45,000 by the assessing officer could not arise and was also not levied. So far as the disallowance of interest on advances made to the associate concerns and the parties is concerned, in my opinion, since the money has been advanced by charging interest, the question of disallowance to that extent or concealing the particulars thereof would not arise. Whatever may be the intention of the associate concerns for taking loan from the assessee in this case of the purchase of shares of BNE, the assessee has no role to play. It is entirely for the persons who are taking loans from the assessee as to how that should be utilised. They may utilise and they may, not utilise as well. But so long as the assessee is charging interest on such advances, the question of making a wrong claim to that extent would not arise. The Commissioner (Appeals) has increased the disallowance by a sum of Rs. 21,59,000 by ignoring the facts that the assessee has received interest from those very parties and, therefore, it cannot be said that the borrowings have been utilised for not earning any income-might be that it was not income from business but certainly it was an income which has been charged to tax and, therefore, the interest payment by the assessee for earning that income was an allowable deduction and making a claim thereof by the assessee would not constitute furnishing of inaccurate particulars or concealment of income thereof.

It has also to be seen that all the material particulars have been furnished by the assessee before the assessing officer, but he chose to disallow only that much interest which pertained to the amount of investment utilised in purchasing the shares of BNE and not on the amount advanced to the other associates. On the same facts and circumstances of the case, the Commissioner (Appeals) has given a different opinion and enhanced the assessment and in these circumstances as observed by the learned Judicial Member the issue would be covered by the decision of the Delhi High Court in the case of Delhi Cloth & General Mills Co. (supra) wherein it was held that the mere fact that the plea of the assessee that the expenditure in question was of revenue nature was not accepted upto the Tribunal, by itself did not mean that the assessee had furnished inaccurate particulars of its income by not adding that back to its total income.

The interest disallowance which has been enhanced by the Commissioner (Appeals) pertained only to the borrowings made by the assessee of Rs. 19 lakhs from two parties to whom interest of Rs. 2,32,113 and Rs. 47,157 was paid. The rate of interest in the case of Gouri Prosad Goenka & Others (HUF) was ranging from 12.5 per cent to 18.5 per cent, whereas in the case of Moorarjee Gokuldas Spinning & Weaving Co. Ltd. it was 13.5 per cent. The assessee has charged the interest @) 12 per cent. Therefore, at the best, the difference only could be said to be for the purpose of other than business. The assessee has given an working of Rs. 7,690 for such difference, which is based at the interest rate of 12.5 per cent in the case of Gouri Prosad Goenka and 13.5 per cent on others. From the rate of interest, however, I find that interest has been paid to Gouri Prosad Goenka & Others not at the uniform rate of 12.5 per cent but varying from 12.5 per cent to 18.5 per cent. Be that as it may, the assessee could not be said to be justified in making the claim of the entire interest on the amount advanced on which it has charged a lesser rate of interest, but that as I have said earlier, cannot be a case of concealment but a case of mere, disallowance. Further, looked at the point of view that the assessee has furnished all the materials before the assessing officer as well as before, the Commissioner (Appeals) it cannot certainly be said to be a case of concealment of furnishing inaccurate particulars thereof. The investment by the persons who have taken loan from the assessee was made in BNE shares but that cannot be a ground for disallowance in the hands of the assessee; more so when the assessing officer himself has disallowed interest pertaining to the investment by the assessee and thought it fit not a case of concealment the question of levying penalty for the disallowance on the money utilised by the loanees in the shares of same very company would not arise. I, therefore, hold that it is not a fit case for levying the penalty and delete the same.